Is the service charge on my bill a tip?
Short answer
Legally, no. A compulsory charge added by the restaurant is the restaurant's revenue, not a tip, and the business may keep all of it — which is the opposite of what the wording on most bills suggests.
A tip and a service charge are different things in law
The Labor Department draws the line by who decides. A tip is money the customer chooses to give and chooses the amount of. A compulsory charge — a service charge, an automatic gratuity on a large table, a kitchen fee — is set by the business, so it counts as the business's revenue.
The consequence is the part nobody prints on the bill: the employer is not required to pass a service charge to the staff at all. Some do, in whole or in part. Legally it is theirs.
So what do you do when you see one
Read the line and decide deliberately rather than reflexively. If a service charge is on the bill, you have already paid something in place of a tip, and adding a full tip on top is paying twice for the same thing.
It is entirely reasonable to ask whether the charge goes to the staff. Where it does, that is your tip and you are done. Where the answer is vague and you want the server to have it, cash in hand is the unambiguous route.
Card tips, and the small deduction that is legal
When you tip on a card, the employer may deduct the actual processing fee that the card company charged on the tip — so a three percent fee means the server receives ninety-seven percent of what you wrote. It may not take more than the actual cost.
That is small enough not to change what you leave. It is worth knowing only because it explains why some servers still prefer cash, and it is not, as is sometimes claimed, the restaurant skimming the tip.
Good to know
- A compulsory service charge is not a tip — it is the business's revenue
- The employer is not required to pass it to staff; ask if you want to know
- If a service charge is on the bill, adding a full tip pays twice
- On card tips the employer may deduct only the actual processing fee
